Crypto Accounting Software - Decoded

The cryptocurrency industry’s explosion has been the talk of the town. Although the value of Bitcoin has halved, interest in cryptocurrency remains high. Nonetheless, the crypto revolution has created a slew of issues for accountants and bookkeepers. They have to deal with an entirely new asset class that behaves in no way like a traditional currency or financial instrument. We feel for you, guys!

Several industries that invested in crypto early on have had to modify their processes and compliance protocols to adapt to this new asset and its volatile nature. This is where Crypto Accounting Software comes in handy.

Crypto Accounting Software automates the tracking of transactions, generation of reports and invoicing activities for individuals and businesses that use cryptocurrency. Furthermore, financial institutions that accept cryptocurrency as payment or trade cryptocurrency can also benefit from this tool. Since crypto is more volatile and strictly governed than other financial assets, these tools are specifically tailored for crypto accounting practices – read on to know what’s unique about them.
 

What Is A Crypto Accounting Software?

 
There is no dearth of accountants in pop culture: think of Andy Dufresne from Shawshank Redemption, Skylar White from Breaking Bad or the loveable Ben Wyatt from Parks and Recreation! However, we believe none of them would be proficient at their jobs when it comes to crypto accounting. They would need Crypto Accounting Software, a tool that accurately tracks crypto transactions in a scalable way, aligning the business strategies with decentralized finance (DeFi) regulations. These tools would support our favorite accountants in tracking and managing crypto transactions using features tailored for the inherent complexities of these assets. This software would also help these accountants keep tabs on crypto wallets to provide accurate time stamps, amounts and addresses of all crypto trades.

Don’t forget that Skylar White used her accounting skills to launder money! With the tax and reporting features of Crypto Accounting Software, businesses can comply with crypto exchange regulations through detailed data tracking. We love Walter White as much as the next person but we also care about gathering financial data needed for crypto governance and regulations.

The one thing Crypto Accounting Software has in common with Breaking Bad is that they both had an epic storyline – read on to know how it evolved (the software, not the TV series!).
 

Evolution And Origins Of Crypto Accounting Software

Crypto Accounting Software does the same job as any other accounting software – except it is designed for cryptocurrency (duh!). Here’s how we got to that stage:
 

• The earliest accounting practices trace back to 8000-5000 BC when the Mesopotamian civilization started recording transactions and amounts.

• In 1887, the AAPA (American Association of Public Accountants) was established as a professional body for auditors and accountants.

• Fast-forwarding to the next century, in 1952, IBM started releasing computers for business use. Accountants were among the first professionals to leverage them for daily operations. This is when accounting software went digital and no longer relied on pen-paper techniques.

• By the 1990s, businesses started using ERP Software to combine financial data from across the enterprise and analyze it together. Moreover, cloud and SaaS models made accounting tools centralized and more automated.

• In the 21^st century, Satoshi Nakamoto laid the groundwork for Bitcoin and the concept of blockchain. His iconic white paper laid out the theory and practice behind the world’s first cryptocurrency: Bitcoin. This would revolutionize the financial world and give rise to the massive adoption of crypto.

• In the early 2010s, blockchain adoption skyrocketed due to its basis in cryptographic proof. This gave birth to hundreds of cryptocurrencies that were adopted by businesses and individuals for financial activities. As they proliferated, there was a dire need for better tools to understand the how, when and who of crypto transactions. This is why Crypto Accounting Software is essential today.

Now that we know how this software was born, let’s dive into its working!
 

How Does A Crypto Accounting Software Work?

 
Well, Ben, we’re here to explain! Crypto Accounting Software essentially automates the routine accounting activities of cryptocurrency trading organizations and individuals. The software accomplishes this by capturing real-time transactional data from crypto exchanges and wallets to provide a consolidated view of crypto financials. More importantly, it calculates the exchange rate between a crypto and fiat currency automatically. So, you know the exact conversion when a trade is made - regardless of the fiat currency or cryptocurrency involved in the transaction! Cool, right? 

Crypto Accounting Software also helps businesses by providing a variety of accounting methods to choose from, including FIFO, LIFO, AVCO and ACB. The best thing is that these solutions are tailored to various entities that invest in or use cryptocurrencies. It can be used by enterprises and organizations that hold massive amounts of cryptocurrency. Accounting and auditing firms that analyze cryptocurrency trades can use this tool to manage and track transactions. Moreover, individuals such as cryptocurrency miners, investors and portfolio managers can also leverage this tool for daily use.

Yet, you must be wondering, don’t crypto exchanges already provide spot exchange rates and transaction invoices – do we really need a dedicated tool for it?

The answer is yes – here’s why.
 

Why Do Businesses Need A Cryptocurrency Accounting Software?

The more scattered financial information is, the harder it is to analyze. A Crypto Accounting Software integrates all crypto transactions – across users, wallets, crypto tokens and exchanges. This helps businesses manage crypto data and easily incorporate it within their enterprise’s financial management tools. As the tools import crypto data at the source, they can provide consolidated reporting in fiat or crypto for better visibility. Also, these tools automatically track crypto transactions between multiple wallets and exchanges, giving businesses complete information about any transaction.

Crypto Accounting Software essentially gives organizations a real-time view of their crypto assets and how they fit into the larger financial picture. To do that, there are certain must-have features it needs.

Read on to find out what they are!
 

Must-Have Features Of A Crypto Accounting Software

Crypto Accounting Software is only useful when it has certain features; here we list them out for your convenience!
 

• Crypto Asset Management

  Crypto Accounting Software must incorporate transactional data easily into your enterprise tools. Hence, financial reporting can include crypto data from all sources, wallets and exchanges to build consolidated reports.

• Reporting

  Talking about reports, we all need reports that give us quick yet detailed insights. This tool provides precise transactional analysis and reports that let you track crypto transactions at scale, enabling real-time views and better decision-making.

• Crypto Inventory Management

  Inventory management lets organizations set up and track sales orders, limit losses and manage overall crypto assets. It assists accountants in tracking prices in real-time, adjusting orders as needed and sending accurate purchase orders to vendors.

• Automation

  How could we possibly overlook automation? Accountants must be able to automatically build account views for each address and wallet, including the time, amount and address for every transaction.

Now that you have a checklist of the must-have features in a Crypto Accounting Software, here’s one about its benefits – yes, we know every accountant loves using checklists!
 

What Are The Benefits Of Using A Crypto Accounting Software?

Crypto can be complex, challenging and volatile. This tool essentially does all the heavy lifting for accountants by:
 

• Seamlessly integrating with crypto exchanges and blockchains for better auditing.

• Automatically calculating unrealized and realized gains and losses.

• Providing a fully programmable API for custom integrations.

• Reconciling crypto asset balances on historical dates and rates.

• Simplifying spot price calculations of exchange rates between cryptocurrency and fiat currency.

• Intelligently classifying transactions based on the exchange, trade value, assets, etc.

 
Well, we agree with you, Andy Dufresne!

That was all about the past and present of Crypto Accounting Software; how it works, how it evolved, its importance and its advantages. Here’s a quick look at the future of this software – dive in!
 

What’s The Future Of Crypto Accounting Software?

 
The future of crypto is bright - but you know that already! ICOs (initial coin offerings) will continue to prosper by adding more use-cases and projects to crypto. Moreover, emerging concepts such as smart cities, DeFi and blockchain technology are exciting prospects for the future. Once built, they will rely on crypto payments to create a better, faster and more accessible global system of transactions. Inevitably, Crypto Accounting Software will also transform to keep up with the changes.

Furthermore, when crypto regulations are established, adoption by enterprises, major institutions and individual investors will grow. As a result, we will see a shift in crypto accounting standards. In the future, Crypto Accounting Software will strive to meet demands for better transparency, convenience and security.
 

Conclusion

Let's face it: cryptocurrency has several advantages over fiat currency, including anonymity, transparency and safety. As regulations and laws smooth out the volatility in the crypto industry, new investors will gain confidence in purchasing and holding cryptos as part of a well-diversified portfolio. Hence, organizations and individuals must be equipped to track, manage and comply with the complex world of crypto assets. Crypto Accounting Software is the answer to all the uncertainty – although it still cannot tell us when Bitcoin will reach $100,000!